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    HD
    Earnings call· Nov 2025(Q3 FY25)

    HOME DEPOT, INC. HD

    Nov 18, 2025 Source

    Executive summary

    The Home Depot Q3 FY25 — Sales Miss Expectations Amid Lack of Storm Activity and Housing Pressure

    The Home Depot's Q3 FY25 results were below expectations, primarily due to a lack of storm activity and ongoing consumer uncertainty impacting home improvement demand. Despite these headwinds, the company saw positive online sales growth and big-ticket transaction strength, while revising down its full-year FY25 guidance for sales, operating margin, and EPS. Management remains focused on market share gains through its Pro ecosystem and supply chain investments.

    Highlights

    5

    • Total sales increased 2.8% to $41.4 billion, including the GMS acquisition.

    • Online comp sales increased approximately 11% year-over-year.

    • Big ticket comp transactions (over $1,000) were positive 2.3% year-over-year.

    • Pro and DIY comp sales were both positive and relatively in line.

    • SRS comped flat in Q3 despite significant pressure in the roofing market, indicating market share gains.

    Concerns

    6

    • Comp sales increased only 0.2% (U.S. comps up 0.1%), missing expectations.

    • Adjusted diluted EPS declined to $3.74 from $3.78 year-over-year.

    • Full-year FY25 total sales growth guidance revised down to approximately positive 3%.

    • Full-year FY25 adjusted operating margin guidance revised down to approximately 13%.

    • Full-year FY25 adjusted diluted EPS guidance revised to decline approximately 5%.

    • Merchandise inventories increased $2.3 billion year-over-year to $26.2 billion, with inventory turns down to 4.5x from 4.8x.

    Guidance & targets

    11
    CategoryTargetConfidence
    Total sales growth
    approximately positive 3%
    high materiality
    High
    GMS incremental sales contribution
    $2 billion
    medium materiality
    High
    Comp sales growth percent
    slightly positive
    high materiality
    High
    Gross margin
    approximately 33.2%
    high materiality
    High
    Operating margin
    approximately 12.6%
    high materiality
    High
    Adjusted operating margin
    approximately 13%
    high materiality
    High
    Effective tax rate
    approximately 24.5%
    medium materiality
    High
    Net interest expense
    approximately $2.3 billion
    medium materiality
    High
    Diluted earnings per share
    decline approximately 6%
    high materiality
    High
    Adjusted diluted earnings per share
    decline approximately 5%
    high materiality
    High
    Capital expenditures
    approximately 2.5% of sales
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Canada
    Posted positive comps in local currency.
    Comp sales: positive
    		—positive——
    Mexico
    Posted positive comps in local currency.
    Comp sales: positive
    		—positive——
    Pro
    Comp sales were positive and relatively in line with DIY.
    Comp sales: positiveStrength in categories: gypsum, insulation, siding, plumbing
    		—positive——
    DIY
    Comp sales were positive and relatively in line with Pro.
    Comp sales: positiveStrength in categories: seasonal product offerings, live goods, hardscapes, other garden products
    		—positive——
    Merchandising Departments
    9 of 16 merchandising departments posted positive comps.
    Positive comps in 9 of 16 departments: kitchen, bath, outdoor garden, storage, electrical, plumbing, millwork, hardware, appliances
    		————

    Operational metrics

    38
    Total sales
    $41.4 billionup 2.8%
    Q3 FY25

    Includes approximately $900 million from the GMS acquisition.

    U.S. Comp sales
    0.1%
    Q3 FY25

    Compared to the same period last year.

    Online comp sales
    11%increased
    Q3 FY25

    Compared to the third quarter of last year.

    Comp average ticket
    1.8%increased
    Q3 FY25

    Primarily reflects a greater mix of higher ticket items, customers trading up, and modest price increases.

    Comp transactions
    1.6%decreased
    Q3 FY25

    Primarily due to the lack of storms relative to historic norms.

    Big ticket comp transactions (over $1,000)
    2.3%positive
    Q3 FY25

    Compared to the third quarter of last year.

    Operating margin
    12.9%compared to 13.5% in Q3 FY24
    Q3 FY25

    Reflects an increase in operating expense as a percent of sales.

    Adjusted operating margin
    13.3%compared to 13.8% in Q3 FY24
    Q3 FY25

    Excludes $158 million in pretax intangible asset amortization.

    Pretax intangible asset amortization
    $158 million
    Q3 FY25

    Impacted operating margin.

    Effective tax rate
    24.3%compared to 24.4% in Q3 FY24
    Q3 FY25

    In line with expectations.

    Diluted earnings per share
    $3.62compared to $3.67 in Q3 FY24
    Q3 FY25

    Reported GAAP diluted EPS.

    Adjusted diluted earnings per share
    $3.74compared to $3.78 in Q3 FY24
    Q3 FY25

    Excludes intangible asset amortization.

    Store count
    2,356
    End of Q3 FY25

    Total store count at the end of the quarter.

    New stores opened
    3
    Q3 FY25

    Opened during the third quarter.

    Capital expenditures
    $900 million
    Q3 FY25

    Invested back into the business.

    Dividends paid
    $2.3 billion
    Q3 FY25

    Paid to shareholders during the third quarter.

    Return on invested capital
    26.3%down from 31.5% in Q3 FY24
    Q3 FY25 TTM

    Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months.

    GMS sales contribution
    $900 million
    Q3 FY25

    Represents approximately 8 weeks of sales from the GMS acquisition.

    Total company comp sales (August)
    2%positive
    August FY25

    Monthly comp performance within Q3.

    Total company comp sales (September)
    0.5%positive
    September FY25

    Monthly comp performance within Q3.

    Total company comp sales (October)
    1.5%negative
    October FY25

    Monthly comp performance within Q3, most acutely impacted by lack of storm activity.

    U.S. comp sales (August)
    2.2%positive
    August FY25

    Monthly comp performance within Q3.

    U.S. comp sales (September)
    0.3%positive
    September FY25

    Monthly comp performance within Q3.

    U.S. comp sales (October)
    1.7%negative
    October FY25

    Monthly comp performance within Q3.

    GMS transaction fees impact on operating margin
    15
    Q3 FY25

    Impact to operating margin for the quarter.

    GMS transaction fees impact on operating margin (FY)
    5
    FY25

    Impact to full year operating margin.

    GMS transaction fees impact on EPS (FY)
    $0.05
    FY25

    Impact to full year EPS.

    SRS comp sales
    flat
    Q3 FY25

    Despite significant pressure in the roofing market, indicating market share gains.

    Roofing shipments
    down double digits
    Q3 FY25

    Reflects the absence of storm activity this year.

    Underlying business comp (storm-adjusted)
    1%
    Q2 FY25, Q3 FY25

    Consistent run rate for the underlying business when adjusted for storm impact.

    Housing turnover
    2.9%40-year lows
    Current

    As a percentage of housing stock, indicating pressure in the housing market.

    Cumulative underspend in repair and remodel
    $50 billion
    Current

    Estimated underspend in normal repair and remodel activity in U.S. housing.

    SRS and GMS pro forma gross margin impact
    120
    Pro forma

    Combined impact on the company's gross margin profile.

    SRS and GMS pro forma operating margin impact
    60
    Pro forma

    Combined impact on the company's operating margin profile.

    SRS and GMS FY25 gross margin impact (YoY)
    55
    FY25

    Year-over-year impact to gross margin reflecting ownership periods of SRS and GMS.

    SRS and GMS FY25 operating margin impact (YoY)
    35
    FY25

    Year-over-year impact to operating margin reflecting ownership periods of SRS and GMS.

    Non-comp sales growth
    0.5
    Current

    Contribution to total sales growth from new investments.

    SRS branch openings
    40-50
    Annual

    Annual pace of greenfield branch openings for SRS.

    Industry KPIs

    9
    MetricValueDetails
    Sg a OPEX ratio20.5%%
    Comparable sales0.2%%
    Store count growth2,356stores
    Gross margin drivers33.4%%
    Pro vs diy performancepositive%
    Share buyback capital return$2.3 billionUSD
    Inventory position markdown risk$26.2 billionUSD
    Same sku like for like inflationmodest
    Distribution supply chain cost economics400bps

    Product announcements

    3
    ProductTypeDetails
    PGT Windowslaunch
    Project Planning Toollaunch
    Blueprint Takeoffs Toollaunch

    Deals & partnerships

    1
    GMSAcquisition of a leading distributor of specialty building products (drywall, ceiling, steel framing) by SRS.

    GMS further enhances SRS's position as a leading multi-category building materials distributor, bringing differentiated capabilities, product categories, and customer relationships complementary to SRS's existing business.

    Risks & headwinds

    8
    Lack of storm activityQ3 FY25, Q4 FY25

    Greater-than-expected pressure in certain categories (roofing, power generation, plywood); most acutely impacted October comps (-1.5% total, -1.7% U.S.).

    Mitigation: Focus on controlling what can be controlled, executing at a high level, and growing market share in any environment.

    Consumer uncertaintyNear-term

    Disproportionately impacting home improvement demand; ongoing concerns due to living costs, affordability, layoffs, and job concerns.

    Mitigation: Delivering a great value proposition for the customer; focusing on market share gains.

    Housing pressureNear-term

    Housing activity at 40-year lows (2.9% turnover of housing stock); home prices started to adjust in even more markets.

    Mitigation: Focus on putting great value propositions in front of the customer and taking share.

    Softening Pro backlogsCurrent

    Pro backlogs for larger projects started to diminish a little bit.

    Mitigation: Continued focus on Pro initiatives and value propositions to capture share in bigger ticket, pro-oriented projects.

    Margin pressure from acquisitions (GMS)Q3 FY25, FY25

    GMS inclusion and transaction fees resulted in approximately 15 bps of operating margin impact in Q3 FY25 and approximately 20 bps impact to FY25 adjusted operating margin guidance.

    Mitigation: Driving synergies through cross-selling and operating efficiencies across the combined platforms.

    Diluted EPS decline (FY25)FY25

    Expected to decline approximately 6% compared to fiscal 2024 (52 weeks in FY25 vs 53 weeks in FY24).

    Mitigation: Focus on operational execution and market share gains.

    Adjusted diluted EPS decline (FY25)FY25

    Expected to decline approximately 5% compared to fiscal 2024 (52 weeks in FY25 vs 53 weeks in FY24).

    Mitigation: Focus on operational execution and market share gains.

    Inventory turns decreaseQ3 FY25

    Inventory turns were 4.5x, down from 4.8x last year.

    Mitigation: Leaning into investments for speed and reliability of delivery, which drives customer engagement and sales.

    What to watch in Q4 FY25

    5

    Underlying demand recovery

    Next quarter
    CurrentApproximately 1% (storm-adjusted)
    TargetIncreased underlying storm-adjusted demand

    Why it matters

    Management does not see immediate catalysts for increased underlying demand, making any improvement a key indicator of market health.

    And then we just don't see the catalyst to increase that underlying storm-adjusted demand in the market.

    Q&A highlights

    6

    How to reconcile the Q4 operating margin given GMS inclusion and prior guidance, and understand the deleverage.

    Richard explained the FY25 operating margin revision (40 bps) is due to GMS (20 bps impact including transaction expenses) and decreased comp sales. Q4 has additional noise from the 53rd week last year (14 weeks vs 13 weeks this year) and seasonal swings in SRS/GMS business. He advised using full-year guidance as the jumping-off point.

    “You then take into account the decrease in our comp sales from 1 comp to slightly positive. And then we -- so that assumption would have obviously deleverage that we've spoken of previously. And then with respect to SRS and its impact, first, SRS continues to perform extremely well.”

    asked by Simeon Gutman (Morgan Stanley) · answered by Richard McPhail

    2 min read6 chapters

    Detailed Narrative

    01

    Q3 Performance & Market Headwinds

    Sales for Q3 FY25 were $41.4 billion, up 2.8%, with comp sales up 0.2% (U.S. up 0.1%). This missed expectations due to a lack of storm activity, particularly impacting categories like roofing and power generation, and continued consumer uncertainty🌐 coupled with housing market pressures🌐. The underlying business comp, adjusted for storm activity, was approximately 1% in both Q2 and Q3.

    02

    Pro Ecosystem & Innovation

    The company continues to mature its Pro ecosystem, leveraging new capabilities like a project planning tool launched in September and blueprint takeoffs using AI for accurate material estimates. These tools aim to simplify complex projects for Pros, positioning Home Depot as a one-stop shop and driving traction in the market.

    03

    Digital & Fulfillment Strategy

    Online comp sales increased approximately 11% YoY, driven by faster delivery speeds and improved customer engagement across interconnected platforms. Investments in the Direct Fulfillment Center (DFC) network are enhancing speed and reliability for all customers, contributing to increased sales.

    04

    GMS Acquisition & Pro Growth

    The acquisition of GMS by SRS, a distributor of specialty building products, was completed in September, contributing approximately $900 million in sales in Q3. GMS enhances SRS's position and is expected to contribute approximately $2 billion in incremental sales for FY25. The combined SRS and GMS entities are seen as engines for growth, with cross-selling opportunities between Home Depot's existing Pro business and the newly acquired wholesale platforms.

    05

    Inventory Management & Capital Allocation

    Merchandise inventories increased by $2.3 billion YoY to $26.2 billion, primarily due to the inclusion of GMS and strategic investments in speed and reliability of delivery. The company invested $900 million in capital expenditures during Q3 and paid $2.3 billion in dividends. Return on invested capital was 26.3%, down from 31.5% YoY.

    06

    Consumer Dynamics & Big Ticket

    While overall transactions decreased, big ticket comp transactions (over $1,000) were positive 2.3%. This is attributed to customers trading up for innovative products and the success of Pro initiatives, rather than a general indicator of improving demand for large discretionary projects, which remain pressured due to financing challenges.

    AI-generated summary of the company’s earnings call. Not investment advice.